The move is likely to boost the sales of guns, but it is unlikely to have a significant impact on the overall revenues of U.S. gun makers, since exports sales account for only 10% of their total revenues.
In efforts aimed at easing the process of the exports of small arms, the Trump Administration’s is moving to simplify norms for such exports, which could provide some relief to U.S. gun makers, including Sturm Ruger & Company and American Outdoor Brands.
With this development reaching news sources, the shares of Sturm Ruger & Company and Smith & Wesson-owner American Outdoor Brands have surged by nearly 18%.
The U.S. gun industry has been grappling with a steep sales slump ever since U.S. President Donald Trump got elected.
However, according to the National Sports Shooting Foundation, the expected relaxation of the rules is likely to boost the exports of gun by as much as 20%.
The move will not only have a deep impact on the industry’s big players, it is also likely to positively impact small gunsmiths and specialists who are currently required to pay an annual federal fee to export their relatively minor quantities of products.
According to annual filing data by American Outdoor and Sturm Ruger, two of the biggest publicly traded U.S. gun makers, their exports account only 10% of their total revenues, thereby even if the Trump Administration’s move will positively impact their inflows, the impact will only be minor on their overall businesses.
Despite this, analysts have reacted positively to the Administration’s plan, which were initiated but not completed by the Obama administration, to shift oversight of international non-military firearms sales from the State Department to the Commerce Department, which would put the focus more squarely on facilitating trade.
“While difficult to estimate the potential financial impact, we believe Smith & Wesson’s iconic brand and products would sell well to international customers,” wrote Steven Dyer, an analyst with Craig-Hallum, in a note to clients.
Sturm Ruger & Company as well as Smith & Wesson did not immediately respond to a request for comment.
During the U.S. election campaign, fears of Hilary Clinton winning the election led to record purchases. With Trump’s surprise win, the effect on gun sales had a reverse effect, since consumers were no longer worried on new gun control measures.
After Trump’s win, gun stocks became a favorite for short sellers who bet they would fall. Even after Tuesday’s rally, Smith & Wesson’s shares were down by 45% from before the election.
Last week, a bill was sent by a congressional committee to the floor of the House of Representatives to ease the sales of silencers by making them less difficult to buy. The bill, part of the Sportsmen Heritage and Recreational Enhancement Act, is aimed at improving the hearing protection for gun owners, according to the congressional committee.
Sturm Ruger is poised to benefit from the new legislation. It has already started ramping up its offering on silencers.
In July, American Outdoor Brands acquired Gemini Technologies, a gun noise level suppressor maker.
These developments, along with Trump’s strong support to the National Rifle Association could potentially turn the tide against slagging sales boost gun makers’ businesses.
“These are the first instances in years where you are actually seeing deregulation on a federal level in firearms. If we are shifting an entire regulatory direction, then that’s a big deal,” said Aegis Capital analyst Rommel Dionisio, who recommends buying shares of American Outdoor Brands.